BITCOIN

RolandFlagg

https://www.youtube.com/watch?v=HtyvFo9oyB8

Excellent discussion with some of the smartest people in the space.

50 minutes in things really got my juices going on what will be an incredible journey the next couple of decades.

Some interesting stats thrown out such as:
Bitcoin Layer 1 now settles as many transactions as VISA and..
Pick any four year time frame in BTCs history and if you had put 2% of your portfolio in it and kept the rest in cash earning nothing you would have outperformed the S&P 500 and also had a much better Sharpe Ratio.

And to think this is just the beginning. The likes of Blackrock and Fidelity are going to be marketing the crap out of how amazing BTC is as an investment and how groundbreaking the tech is.

fwor

Scottex99 said:

I honestly have no idea. It’s been raised over the years and debunked I think. 

It hasn't been debunked, and it can't be, for the following reason: nobody knows exactly how computing in general (and quantum computing specifically) will advance in future.

If it advances a little quicker than expected, everything that depends on cryptography will be affected sooner rather than later. That's not just cryptocurrencies - the security of online banking, and of secure messaging, and of credit card transactions, and a lot more will be affected too.

The solution isn't difficult in principle - in many cases making keys bigger will be enough, but there are also several programmes that have been under way for years now to develop cryptographic algorithms that are resistant to compromise by quantum computing.

So: not debunked, still "of concern" - but something that can be addressed in future (at a development cost).

Scottex99

Yep, you’re right, bad terminology by me.

I meant it’s not a current concern, but could be in the future the reasons you gave 

MeteredOut

Scottex99 said:

It’s all to do with FinProm rules and a new version of it. 

UK super strict on protecting consumers now so exchanges are having to “vet” all users and have banners all over their websites.

Protect people from scams all good but now some people might have to jump through hoops to buy £100 of BTC, yet they can walk into any casino (with a membership) and drop £50k in a night in cash?

Probably better chance of making a profit in the casino.

<runs away>

I suspect its because most people are better placed to appreciate the risks in the casino; they're still plenty of people who will see a picture on TikTok of someone sitting on an expensive car, and they'll sign up with little research. Call it a side-hustle, and they money will follow.

masonic

Scottex99 said:

masonic said:

Was wondering what people's take on the recent progress in quantum computing was. It seems not so long ago they were heralding being able to factor an odd number larger than 21. Now they have 48 logical qubits to work with. IIRC bitcoin uses 256-bit ECC for its keypairs, requiring >906 qubits to break in a quantum attack. If nothing else I found the language in the abstract of the article quite entertaining as a non-physicist, suspect the key was perfecting the feedforward entanglement teleportation   https://www.nature.com/articles/s41586-023-06927-3

I honestly have no idea. It’s been raised over the years and debunked I think. 

But obviously relevant as computer power gets super strong in the future.

Same way it’s been debunked that NFTs boil the ocean or 1 Bitcoin block uses the same electricity as the whole of Canada or whatever, although I have no sources to hand, that narrative has almost completely vanished 

Well, before this it was suggested that susceptible cryptography would be safe until at least 2030 in the worst case scenario. The authors conclude that "The use of the zoned architecture and logical-level control should allow our techniques to be readily scaled to over 10000 physical qubits by increasing laser power and optimizing control methods, while QEC efficiency can be improved by reducing two-qubit gate errors to 0.1%." I've no idea how easily or quickly the scaling up could be done, or if any efficiencies of scale could be leveraged in the cross-qubit error correction to give a higher ratio of logical to physical, but that would be the end of 256-bit elliptic curve cryptography, and close to the end for the more primitive prime factoring variant with today's key sizes. Meanwhile NIST has been busy standardising quantum-resistant crypto algorithms for release this year. Everything that can be updated will have the option to moving to one of those in the event quantum advances enough to be of threat. Seems more a question of when not if now, but it could still be quite a way off.

I'd be interested in what would happen to the subject of this thread - does Bitcoin get forked with a quantum-resistant version? Or is there some other mechanism to change the underlying crypto?

Aegis

RolandFlagg said:

https://www.youtube.com/watch?v=HtyvFo9oyB8

Excellent discussion with some of the smartest people in the space.

50 minutes in things really got my juices going on what will be an incredible journey the next couple of decades.

Some interesting stats thrown out such as:
Bitcoin Layer 1 now settles as many transactions as VISA and..
Pick any four year time frame in BTCs history and if you had put 2% of your portfolio in it and kept the rest in cash earning nothing you would have outperformed the S&P 500 and also had a much better Sharpe Ratio.

And to think this is just the beginning. The likes of Blackrock and Fidelity are going to be marketing the crap out of how amazing BTC is as an investment and how groundbreaking the tech is.

The problem with this is that it is purely a discussion of the past performance, and as we know, past performance is not a guarantee of future performance. Goes without saying that very high returns are simply not sustainable in the very long run, meaning the returns either have to level out or collapse altogether.  The long term prospects still boil down to "where is the return coming from?" and the answer is still "from greater fools" (not a statement that everyone buying into bitcoin is a fool, but rather a reference to greater fool theory, which is discussed periodically in this thread) and not from any sort of actual economic activity.

Berrnie Madoff had a very successful investment strategy for many years, and anyone not investing in his strategy was probably being told "you could get better returns with less volatility" by giving him their money. Worked well for early adopters, but much less so for those caught in the latter days before the whole thing unwound.

RolandFlagg

Aegis said:

RolandFlagg said:

https://www.youtube.com/watch?v=HtyvFo9oyB8

Excellent discussion with some of the smartest people in the space.

50 minutes in things really got my juices going on what will be an incredible journey the next couple of decades.

Some interesting stats thrown out such as:
Bitcoin Layer 1 now settles as many transactions as VISA and..
Pick any four year time frame in BTCs history and if you had put 2% of your portfolio in it and kept the rest in cash earning nothing you would have outperformed the S&P 500 and also had a much better Sharpe Ratio.

And to think this is just the beginning. The likes of Blackrock and Fidelity are going to be marketing the crap out of how amazing BTC is as an investment and how groundbreaking the tech is.

The problem with this is that it is purely a discussion of the past performance, and as we know, past performance is not a guarantee of future performance. Goes without saying that very high returns are simply not sustainable in the very long run, meaning the returns either have to level out or collapse altogether.  The long term prospects still boil down to "where is the return coming from?" and the answer is still "from greater fools" (not a statement that everyone buying into bitcoin is a fool, but rather a reference to greater fool theory, which is discussed periodically in this thread) and not from any sort of actual economic activity.

Berrnie Madoff had a very successful investment strategy for many years, and anyone not investing in his strategy was probably being told "you could get better returns with less volatility" by giving him their money. Worked well for early adopters, but much less so for those caught in the latter days before the whole thing unwound.

You are kind of making a case for Bitcoin.

Active Management, the kind that Madoff was offering adds another layer of risk. Not only do you have market risk that you get with passive index funds, but you are now adding a Human risk.
You could get a Buffett or Lynch or you could get a Woodford or Madoff.
Madoff fooled people because he offered them a product with no volatility, which is impossible, but because people are risk adverse, myopic and not knowing that risk and volatility are not the same bought into it.

So for years people have called Bitcoin too volatile.
Madoff's fund wasn't volatile.
So far which has been the ponzi?

Was Amazon stock a ponzi because it has fallen in price by 90% twice?
Or Nvidia because it has fallen in price by 85% twice.

New and exciting tech is volatile as it's still in price discovery mode.
It's a feature not a bug.

Portfolio management suggests the more volatile something is, the less of it you should have, because when the asset goes parabolic a small amount goes a long way.
That is what has happened with Bitcoin, and anyone who thinks it won't keep outperforming the stock market and Gold over the long term are just fooling themselves.

It's just got going.

https://www.youtube.com/watch?v=u1-oN8L9590

RolandFlagg

Jurrien Timmer, Director of Global Macro, Fidelity.
A highly respected smart guy with decades of experience.
He gets it.

https://www.youtube.com/watch?v=U9vgHWT3Dd8

And Brian Estee does.

https://www.youtube.com/watch?v=amstE1z3CpI

Aegis

RolandFlagg said:

Aegis said:

RolandFlagg said:

https://www.youtube.com/watch?v=HtyvFo9oyB8

Excellent discussion with some of the smartest people in the space.

50 minutes in things really got my juices going on what will be an incredible journey the next couple of decades.

Some interesting stats thrown out such as:
Bitcoin Layer 1 now settles as many transactions as VISA and..
Pick any four year time frame in BTCs history and if you had put 2% of your portfolio in it and kept the rest in cash earning nothing you would have outperformed the S&P 500 and also had a much better Sharpe Ratio.

And to think this is just the beginning. The likes of Blackrock and Fidelity are going to be marketing the crap out of how amazing BTC is as an investment and how groundbreaking the tech is.

The problem with this is that it is purely a discussion of the past performance, and as we know, past performance is not a guarantee of future performance. Goes without saying that very high returns are simply not sustainable in the very long run, meaning the returns either have to level out or collapse altogether.  The long term prospects still boil down to "where is the return coming from?" and the answer is still "from greater fools" (not a statement that everyone buying into bitcoin is a fool, but rather a reference to greater fool theory, which is discussed periodically in this thread) and not from any sort of actual economic activity.

Berrnie Madoff had a very successful investment strategy for many years, and anyone not investing in his strategy was probably being told "you could get better returns with less volatility" by giving him their money. Worked well for early adopters, but much less so for those caught in the latter days before the whole thing unwound.

1. You are kind of making a case for Bitcoin.

Active Management, the kind that Madoff was offering adds another layer of risk. Not only do you have market risk that you get with passive index funds, but you are now adding a Human risk.
You could get a Buffett or Lynch or you could get a Woodford or Madoff.
Madoff fooled people because he offered them a product with no volatility, which is impossible, but because people are risk adverse, myopic and not knowing that risk and volatility are not the same bought into it.

So for years people have called Bitcoin too volatile.
Madoff's fund wasn't volatile.
2.  So far which has been the ponzi?

Was Amazon stock a ponzi because it has fallen in price by 90% twice?
Or Nvidia because it has fallen in price by 85% twice.

New and exciting tech is volatile as it's still in price discovery mode.
It's a feature not a bug.

Portfolio management suggests the more volatile something is, the less of it you should have, because when the asset goes parabolic a small amount goes a long way.
That is what has happened with Bitcoin, and anyone who thinks it won't keep outperforming the stock market and Gold over the long term are just fooling themselves.

3.  It's just got going.

https://www.youtube.com/watch?v=u1-oN8L9590

1. I'm really not. If you think I am, then you are focusing on wholly the wrong things.

2. Both. It's not an either/or choice. The difference is that Madoff's scheme was for his benefit and has collapsed, while bitcoin has yet to collapse. Doesn't mean that bitcoin is more valid than Madoff's scheme, it just means that, for now, enough people still believe in bitcoin as an investment for it to continue performing well. That doesn't change the fact that it does nothing, generates no economic return as a unit and therefore has absolutely no reason to grow in value. As such, it is wholly sentiment driven, i.e. people more or less arbitrarily deciding to ascribe value to something valueless. That's not an investment, therefore it has no place in my or my client's portfolios.

3. Perhaps it has. Or perhaps this is the last gasp before people who bought in at, say, $40,000 realise that there just aren't enough people willing to buy in at, say, $60,000 to drive the price higher. When that happens, the liquidity will dry up and the price will plummet. It might recover, but any major fall could be the last one because there isn't a floor to the price underpinned by economic activity. The history of bitcoin price over time looks like nothing more than a series of bubbles bursting, the unusual part is the number of times the process has repeated.

I have asked on a number of occasions for people to tell me how to calculate a fair price for something like bitcoin, and still nothing. I'm afraid that functions to do with the network size really don't make much sense, as the underlying asset does the same whether the network is a single person or everyone on the planet. Without a mechanism for calculating fair value, there's no way to know whether you are paying a good price for your assets or just a price that has been driven wholly by irrational sentiment.

thegentleway

Aegis said:

RolandFlagg said:

Aegis said:

RolandFlagg said:

https://www.youtube.com/watch?v=HtyvFo9oyB8

Excellent discussion with some of the smartest people in the space.

50 minutes in things really got my juices going on what will be an incredible journey the next couple of decades.

Some interesting stats thrown out such as:
Bitcoin Layer 1 now settles as many transactions as VISA and..
Pick any four year time frame in BTCs history and if you had put 2% of your portfolio in it and kept the rest in cash earning nothing you would have outperformed the S&P 500 and also had a much better Sharpe Ratio.

And to think this is just the beginning. The likes of Blackrock and Fidelity are going to be marketing the crap out of how amazing BTC is as an investment and how groundbreaking the tech is.

The problem with this is that it is purely a discussion of the past performance, and as we know, past performance is not a guarantee of future performance. Goes without saying that very high returns are simply not sustainable in the very long run, meaning the returns either have to level out or collapse altogether.  The long term prospects still boil down to "where is the return coming from?" and the answer is still "from greater fools" (not a statement that everyone buying into bitcoin is a fool, but rather a reference to greater fool theory, which is discussed periodically in this thread) and not from any sort of actual economic activity.

Berrnie Madoff had a very successful investment strategy for many years, and anyone not investing in his strategy was probably being told "you could get better returns with less volatility" by giving him their money. Worked well for early adopters, but much less so for those caught in the latter days before the whole thing unwound.

1. You are kind of making a case for Bitcoin.

Active Management, the kind that Madoff was offering adds another layer of risk. Not only do you have market risk that you get with passive index funds, but you are now adding a Human risk.
You could get a Buffett or Lynch or you could get a Woodford or Madoff.
Madoff fooled people because he offered them a product with no volatility, which is impossible, but because people are risk adverse, myopic and not knowing that risk and volatility are not the same bought into it.

So for years people have called Bitcoin too volatile.
Madoff's fund wasn't volatile.
2.  So far which has been the ponzi?

Was Amazon stock a ponzi because it has fallen in price by 90% twice?
Or Nvidia because it has fallen in price by 85% twice.

New and exciting tech is volatile as it's still in price discovery mode.
It's a feature not a bug.

Portfolio management suggests the more volatile something is, the less of it you should have, because when the asset goes parabolic a small amount goes a long way.
That is what has happened with Bitcoin, and anyone who thinks it won't keep outperforming the stock market and Gold over the long term are just fooling themselves.

3.  It's just got going.

https://www.youtube.com/watch?v=u1-oN8L9590

1. I'm really not. If you think I am, then you are focusing on wholly the wrong things.

2. Both. It's not an either/or choice. The difference is that Madoff's scheme was for his benefit and has collapsed, while bitcoin has yet to collapse. Doesn't mean that bitcoin is more valid than Madoff's scheme, it just means that, for now, enough people still believe in bitcoin as an investment for it to continue performing well. That doesn't change the fact that it does nothing, generates no economic return as a unit and therefore has absolutely no reason to grow in value. As such, it is wholly sentiment driven, i.e. people more or less arbitrarily deciding to ascribe value to something valueless. That's not an investment, therefore it has no place in my or my client's portfolios.

3. Perhaps it has. Or perhaps this is the last gasp before people who bought in at, say, $40,000 realise that there just aren't enough people willing to buy in at, say, $60,000 to drive the price higher. When that happens, the liquidity will dry up and the price will plummet. It might recover, but any major fall could be the last one because there isn't a floor to the price underpinned by economic activity. The history of bitcoin price over time looks like nothing more than a series of bubbles bursting, the unusual part is the number of times the process has repeated.

I have asked on a number of occasions for people to tell me how to calculate a fair price for something like bitcoin, and still nothing. I'm afraid that functions to do with the network size really don't make much sense, as the underlying asset does the same whether the network is a single person or everyone on the planet. Without a mechanism for calculating fair value, there's no way to know whether you are paying a good price for your assets or just a price that has been driven wholly by irrational sentiment.

How do you work out the price of futures, derivatives, gold, etc… ?

It don’t have to be a productive asset; just need enough people to believe it’s a store of value.